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of <h1>CESTAT decision upheld on Consulting Engineer services exemption. Works contracts not subject to service tax.</h1> <h3>CST., BANGALORE Versus TURBOTECH PRECISION ENGINEERING PVT. LTD.</h3> The High Court upheld the CESTAT's decision in favor of the respondent, ruling that the activities did not fall under Consulting Engineer services for ... Consulting Engineer Service- The respondent-assessee is registered under the provisions of Finance Act 1994. The Department holding that the respondent-assessee is rendering services like, design development, design review, installation and commissioning and technology transfer for study and design of oil free compressor systems, brought the respondent-Company within the scope of “Consulting Engineer” service as per section 65(13) of the Finance Act. Held that- impugned period being prior to 2006, respondent not covered under consulting engineer service. service tax liability not arise. Further held that- provisions bringing Work Contract service into net w.e.f. 1.6.2007. contract for period between 1997 to 2001 in the present case. Revenue not empowered to demand service tax, interest and penalty. Issues:1. Whether the CESTAT correctly set aside the order of the revenue regarding service tax on design developmentRs.2. Whether the contracts entered into by the respondent were classified as 'Works Contracts'Rs.3. Applicability of decisions relied on by CESTAT to the present case.Analysis:Issue 1:The appeal arose from the CESTAT's decision on the service tax liability of the respondent under the category of Consulting Engineer service. The Department contended that the respondent's activities fell within this ambit, leading to a demand for service tax. However, the CESTAT concluded that the respondent was not liable for service tax, interest, or penalty. The High Court analyzed the definition of Consulting Engineer under Section 65(13) of the Finance Act, emphasizing that the service provided did not fall under this category before the 2006 amendment. As the service could not be considered as consulting engineering, the Court ruled in favor of the respondent on this issue.Issue 2:Regarding the classification of the contracts, the Court referred to Section 65(105)(zzzza) defining 'works contract.' The Court noted that the relevant contract in this case fell under this definition, specifically under Explanation (a) and (e). However, as this section came into effect from 1-6-2007 and the contract was for the period between 1997 to 2001, the revenue could not demand service tax, interest, or penalty for this contract. Consequently, the Court ruled in favor of the respondent on this issue as well.Issue 3:The Court addressed the applicability of decisions cited by the CESTAT to the present case. It was crucial to determine whether the legal principles relied upon by the CESTAT were relevant and applicable to the facts of this case. The Court did not find the decisions to be in favor of the revenue, leading to a ruling against the revenue and in favor of the respondent on this issue.In conclusion, the High Court dismissed the appeal, upholding the decisions of the CESTAT in favor of the respondent on all substantial issues raised.
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